What the Financial Services Industry Needs from e-KYC

Given the significance of e-KYC to the fast emerging Fintech industry in India, the uncertainty around its implementation has the potential of delivering a crippling blow to this blossoming sector.

While the RBI has made provisions for onboarding customers in non face-to-face scenarios, restrictions imposed on transactions with such customers is out of sync with any intention to truly transform to a ‘presence-less’ industry.

These norms include

  • Bank accounts opened using OTP based verification have a limit of Rs 100,000 that may be deposited in them.
  • Loans exceeding Rs 60,000 cannot be extended to people for whom in-person biometric KYC has not been conducted.
  • Moreover, in almost all cases where in-person KYC is not conducted within a year of the OTP based verification, the account is expected to be shut down.

For new-age Fintechs, many of them our clients, these restrictions make no sense at all. These businesses serve customers digitally with virtually no face-to-face interactions and don't really need to set up a nationwide network of branch offices and employees.

Transaction limits mean that these organizations are not able to serve high value customers. On the other hand, the necessity for biometric verification would require startups like mobile wallet providers and lending companies to incur huge costs.

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These businesses find themselves in a catch-22 situation.

Implementing in-person KYC practices do not make business sense for them, while not adhering to the norms attracts penalties that also seriously hinder the viability of business.

The RBI's main concern with an OTP based authentication without the presence of the individual is the threat of identity impersonation using a stolen phone. But such concerns can be addressed using simple mechanisms available today.

Mobile devices are capable of capturing biometric information;

Video KYC is easily possible;

Digital images can be verified;

Verification using test deposits to existing bank accounts.

In fact, in-person KYC can also be manipulated through collusion and forgery.  Apart from Aadhaar, most the other identity documents acceptable for in-person verification cannot be validated from a central registry in real time.

At IDfy, we have been working towards using technology, data sciences, and machine learning algorithms to make virtual identification and authentication watertight and foolproof.

Results from our product implementations show that it's possible to improve fraud detection while making it easy for businesses and consumers to transact at the speed at which the virtual world runs.

Read: How Machine Learning detects tampered and forged digital images. Click here

We believe RBI needs to embrace technology that makes e-KYC safer and more secure while giving a boost to an emerging sector that can impact millions of people by giving them access to finance at the click of a button.

We have faith in India's central bank and we are optimistic that it's only a matter of time that our KYC process catches up with the industry.

To find out more on IDfy's fraud detection products for the Banking and Finance industry, Click here